Conventional Mortgage
Definition of "Conventional mortgage"
A mortgage requiring a substantial down payment. It is usually only available to those having good credit, and has fixed monthly payments for the life of the loan. It usually has a 30 year period of fixed interest rates discharged on an amortized basis with equal monthly payments. The term conventional refers to a mortgage that is not FHA-insured or VA-guaranteed. Since there is no third person or entity to insure or guarantee the mortgage, the lender assumes full risk of default by the borrower. A lenders decision to make a conventional mortgage is usually dependent upon: (1) the value of the property being used to secure the debt and (2) the credit and income position of the borrower. As more and more conventional mortgages have been made, the loan to value ratio (relationship between the amount borrowed and the appraised value of the property) has continued to increase, even though most lenders still limit the amount they will lend to no more than 80% of value unless private mortgage insurance is carried. This down payment required is higher than with either VA or FHA loans. As the market price of residential real estate has continued to increase, a larger cash down payment has been required of the borrower, and thus many people have been eliminated from financing with a conventional mortgage. With both guaranteed and insured mortgages, people have been able to purchase real estate with a smaller cash down payment.
Popular Real Estate Terms
Judicial order prohibiting a person or business from doing something. The court may issue this dictate when unlawful conduct or activity is occurring. ...
Payment of the minimum tax by using legal tax planning opportunities such as estate planning. The use of tax avoidance strategies is a sound approach to retaining cash flow. On the other ...
Financing of a home based on how much equity the homeowner has in it. The interest rate is typically a variable one. ...
Geographical area for which a given governmental agency has authority and responsibility. For example, the jurisdiction of a county court is the county in which it is located. ...
Yearly tax return filed by an individual or couple. It is due to the federal taxing authority on April 15 for the preceding calendar year. The taxpayer reports gross income, adjustments to ...
Hallow masonry wall consisting of an inner and outer wall with dead air space between them. The air space provides increased thermal insulation. Cavity walls are not used in northern ...
Accelerated depreciation method in which the amounts recognized in the early years of the property's useful life are greater than those recognized in the later years. The SYD is found by ...
Negative characteristics about real property which do not meet the needs of the usual occupant. Examples are inadequate lighting in the rooms and a one-car garage when a two-car garage is ...
Real estate bought and leased to tenants to obtain rental income. ...
Have a question or comment?
We're here to help.